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Septem­ber 2020 marked a turning point for the commer­cial­iza­tion of Digital Health in Germany…and world­wide. The first fully reimbursed Digital Health Appli­ca­tions (DiGA) were launched in Germany based on the Digital Health­care Act (DVG) and Digital Health Appli­ca­tions Ordinance (DiGAV). Meanwhile sever­al countries like Belgium, France and Austria used the German legis­la­tion as a blueprint and intro­duced or announced similar Digital Health initia­tives. For the first time devel­op­ers (and investors) saw the oppor­tu­ni­ty to bring innov­a­tive digital solutions to the market that are paid for by the nation­al statu­to­ry health insur­ance system. This raised the expec­ta­tions of steady and growing revenue streams just like for pharma­ceu­ti­cal products.

Let’s take a closer look at the current status of the DiGA market in Germany and what remained of the gold rush atmos­phere. Partic­u­lar­ly in the light of recent acqui­si­tion of two German DiGA compa­nies by the Icelandic digital thera­peu­tics compa­ny Sidekick Health, along with the growing inter­est from Nordic DTx providers in tapping into the commer­cial poten­tial of Europe’s largest market.

1. Status Quo of the DiGA Market in Germany

The DiGA Landscape in a nutshell

• Most DiGA are mobile appli­ca­tions based on cogni­tive behav­ioral thera­py
• DiGA cover a large variety of indica­tions with mental health/neuro/psych being the most crowd­ed thera­py area
• As of Dec 2024, 56 DiGA are listed in the DiGA Direc­to­ry, 36 perma­nent­ly listed and 20 with a prelim­i­nary listing
• HelloBet­ter, Selfapy and Gaia have success­ful­ly launched multi­ple DiGA, others are current­ly a one or two product compa­ny, some of them with a solid product devel­op­ment roadmap
• Three months is the standard treat­ment period covered by one prescrip­tion, while repeat prescrip­tions are possi­ble.
• Across all DiGA, only 13% of prescrip­tions are repeat prescrip­tions.
• The average price set by the DiGA compa­nies for the first 12 months (assess­ment period) is €529, dropping to €221 after negoti­a­tions with the health insur­er associ­a­tion
• On average, 89% of DiGAs are prescribed by doctors, while 11% are patient-applied, making B2B/HCP the prima­ry sales channel
• With 71%, the major­i­ty of DiGA users are female

The “Macro-Environ­ment” for digital health appli­ca­tions in Germany
The initial­ly estab­lished hype for DiGAs by investors and devel­op­ers has worn off, with patients, prescribers, and payors now gener­al­ly more conser­v­a­tive and slight­ly bearish on the case. Meanwhile, the major­i­ty of patients remain unaware of DiGA as a treat­ment option for specif­ic indica­tions, with 60% of the popula­tion unaware of digital health offer­ings in 2023.

Aware­ness among prescribers is improv­ing slowly over time. Health­care profes­sion­als (HCPs) expressed concerns about the high prices of DiGAs relative to the clini­cal value for patients. In addition many criti­cized the lack of adequate monetary compen­sa­tion for the time and effort required to educate patients, prescribe a DiGA and follow up with patients.

Overall, the avail­abil­i­ty of DiGA (respec­tive­ly digital thera­pies in gener­al) as a thera­py option is still perceived as a positive devel­op­ment. Major corner­stones of the DiGA regula­to­ry frame­work (pricing and clini­cal evidence require­ments) are, nonethe­less, viewed as highly contro­ver­sial by key stake­hold­er groups, creat­ing polit­i­cal and regula­to­ry headwinds for the DiGA indus­try.

2. Commercial challenges for DiGA Go-to-Market

As illus­trat­ed above, the total Rx/revenue volume for individ­ual DiGAs did not skyrock­et, contrary to early predic­tions from consul­tan­cies and investors. Even the market leader zanadio “only” achieved 28k Rx in the third year on the market which equates to €6.1m gross revenue (as for all DiGAs the negoti­at­ed price of €218 includes VAT). The aidhere website (provider of zanadio) stated that during the same period, the compa­ny had over 150 employ­ees. Even though this may not be equiv­a­lent to 150 FTEs, it is clear that the Rx volume market leader must have been far from profitabil­i­ty with this level of labor cost.

So, what makes commer­cial­iz­ing DiGAs success­ful­ly (=profitable) so diffi­cult?

Three criti­cal factors can be identi­fied:

• Factors you can influ­ence:
  Compa­ny Set-up
• Factors you can deal with:
  Market Condi­tions
• Factors you can’t do anything about:
  Regula­to­ry Frame­work

Company Set-up

Team and culture
Most founder teams of DiGA compa­nies consist of medical doctors and/or software devel­op­ers. Very rarely will you find someone with a commer­cial background, such as from leading consult­ing firms or with sales and market­ing experi­ence in health­care or life sciences.

The thera­peu­tic and techni­cal exper­tise is a great combi­na­tion to devel­op a Digital Health product and to convince investors. Howev­er, for most DiGA compa­nies it turned out that this founder team compo­si­tion was a major challenge in devel­op­ing and deploy­ing a success­ful go-to-market strat­e­gy, simply because none of them ever launched a prescrip­tion product in a highly regulat­ed market.

In theory this could have easily been addressed by the right hiring strat­e­gy but most DiGA compa­nies thought that they “have a digital product and will market it primar­i­ly digital­ly”. So they hired sales and market­ing leaders with a D2C/performance market­ing and/or SaaS background instead of B2B/healthcare/pharma experts.

This is a question­able strat­e­gy if B2B/HCP is the dominant sales channel and it took most of the DiGA compa­nies a long time to realize that they need to adopt pharma sales and market­ing tactics. And still today as a recent poll on LinkedIn amongst DiGA founders indicates, the major­i­ty believes that R&D is their core compe­ten­cy instead of sales & market­ing.

Indica­tion in scope
Making the right decision regard­ing the portfo­lio of indica­tions is crucial for commer­cial success. Four parame­ters can be identi­fied to predict the commer­cial poten­tial of a DiGA (Exhib­it 03).

Second and third movers in an indica­tion lag far behind first movers’ Rx levels

Market conditions

Low “carry­over” for DiGAs
With an average of only 13% of all DiGA Rx being repeat prescrip­tions for the same patient (actual repeat Rx numbers vary between low single digit percent­ages e.g. for many mental health DiGAs and a max of 37% for zanadio/ obesi­ty), it is obvious that DiGA revenue and growth can only come from new patients which explains high sales and market­ing cost in order to deliv­er Rx growth.

For compar­i­son, in typical chron­ic condi­tions (e.g., high blood pressure or diabetes), pharma products with ongoing repeat prescrip­tions have a carry­over (revenue gener­at­ed in the next period without any sales activ­i­ty) of between 80% and 90%. This allows pharma sales to focus on gener­at­ing incre­men­tal sales.

The afore­men­tioned tenden­cy of most DiGA compa­nies to allocate too much resources to DTC/direct to patient channels has a negative effect on profitabil­i­ty because B2C customer acqui­si­tion cost (CAC) are higher and show little economies of scale compared to B2B/HCP sales. Of course there are strate­gic oppor­tu­ni­ties in thera­peu­tic area cover­age, product design and position­ing to increase the Rx repeat prescrip­tion share and thus reduce the cost pressure from new customer acqui­si­tion. The room for improve­ment is unfor­tu­nate­ly limit­ed here.

The biggest lever, is the devel­op­ment and execu­tion of a highly target­ed sales and market­ing strat­e­gy that maximizes output and optimizes return on invest­ment (ROI).

Competitive situation

Until now, the ‘first to market’ DiGA has captured the major­i­ty of the market share. The second or third in an indica­tion have not come close to reach­ing the Rx levels of the market leader. Four factors could explain this.

There is typical­ly little differ­en­ti­a­tion between DiGAs in the same indica­tion, and any new DiGA is often perceived as a ‘me too’ product. This is because there is limit­ed room for real innova­tion (e.g., mode of action) when DiGAs follow medical guide­lines, where cogni­tive behav­ioral thera­py is often the first-line treat­ment. Its princi­ples are then trans­ferred into a digital appli­ca­tion.

As a conse­quence of the approval process, DiGAs enter­ing the market 12 months after the first movers are more expen­sive (due to prelim­i­nary listing with a higher, provider-set price in the first 12 months) compared to the perma­nent­ly listed market leader, which has a lower negoti­at­ed price after that period. Although prescrib­ing a DiGA does not count against an HCP’s budget, many doctors still use DiGA prices as a refer­ence point for their prescrib­ing decisions. Perma­nent­ly listed market leaders have already provid­ed full clini­cal evidence, where­as new competi­tors typical­ly launch with a prelim­i­nary listing and ‘weaker’ clini­cal evidence.

DiGA early adopters in the HCP universe have already devel­oped into loyal prescribers of the first to market DiGA if their experi­ence was positive. Howev­er, if outcomes or patient feedback were unfavor­able, it becomes signif­i­cant­ly more diffi­cult to convince HCPs to try a new DiGA product within the indica­tion area. Under­stand­ing the conse­quences of these market dynam­ics is crucial for devel­op­ing an efficient strat­e­gy for a second to market product.

Regulatory framework

Prescrip­tion process
The German DiGA legis­la­tion has many positive aspects, but the prescrip­tion process is over-compli­cat­ed and leads to many ineffi­cien­cies. If a doctor prescribes a DiGA, the patient receives a paper script which they have to submit to their health insur­ance. The health insur­ance then issues an activa­tion code and sends this to the patient by mail which used to take up to two weeks (since recent­ly health insur­ers are oblig­ed to provide the activa­tion code within two days).

Using this activa­tion code, the patient can then start their digital thera­py. This compli­cat­ed process results in a signif­i­cant loss, with 30% to over 50% of prescrip­tions not convert­ing into actual thera­py starts, which are neces­sary for reimburse­ment. With the intro­duc­tion of the electron­ic health record and the electron­ic prescrip­tion in Germany, this could improve. That said, the initial techni­cal concept devel­oped by gematik (German Nation­al Agency for Digital Medicine) for a new prescrip­tion process does not look very promis­ing and will hopeful­ly go through some itera­tions towards a more efficient process.

Upcoming regulatory changes

One of the major regula­to­ry changes with direct commer­cial impact that will come into effect in January 2026 is the intro­duc­tion of an “Accom­pa­ny­ing Success Measure­ment” compo­nent. Based on the „Act to Accel­er­ate the Digital­iza­tion of Health­care“ (Digital-Gesetz — DigiG), DiGA compa­nies will need to conduct an Accom­pa­ny­ing Success Measure­ment, the results of which will be regular­ly published in the DiGA direc­to­ry. Key metrics include:

• Duration and frequen­cy of use
• Patient satis­fac­tion regard­ing the quali­ty
• Patient-report­ed health status during the use

Detailed provi­sions on data submis­sion deadlines, methods, process­es, and content of the success measure­ment, as well as on publi­ca­tion in the DiGA direc­to­ry, are to be regulat­ed in an upcom­ing amend­ment to the DiGA Ordinance (DiGAV).

Most impor­tant­ly, at least 20% of the final reimburse­ment price will be based on the results of the success measure­ment. This can be a signif­i­cant revenue risk for the DiGA providers depend­ing on the final results of the negoti­a­tions on the exact terms for the intro­duc­tion of the Accom­pa­ny­ing Success Measure­ment frame­work between the Nation­al Associ­a­tion of Statu­to­ry Health Insur­ance Funds and the Associ­a­tions repre­sent­ing the DiGA compa­nies.

In gener­al, the market environ­ment for devel­op­ing a commer­cial­ly success­ful DiGA business in Germany is quite challeng­ing. Although most DiGA founders consid­er R&D and thera­py devel­op­ment the core compe­ten­cy of a DiGA compa­ny, sales and market­ing are, in fact, the real challenge and the main value driver.

3. Is DiGA an interesting investment case?

Invest­ing in a DiGA compa­ny is not a straight­for­ward case. The founders, or manage­ment team, are funda­men­tal to success. They need to have a clear and focused go-to-market strat­e­gy in place and ideal­ly concen­trate on commer­cial­ly attrac­tive indica­tions. Platform compa­nies with multi­ple DiGAs have a clear advan­tage over single-product compa­nies. By offer­ing a portfo­lio of comple­men­tary products for the same HCP target group, they can achieve economies of scale in sales.

Overall, the DNA of a DiGA compa­ny needs to be commer­cial-first. What is often found instead is a purpose/im­pact-first approach, as illus­trat­ed by a recent LinkedIn poll among digital health and DiGA founders. This might lead to subop­ti­mal portfo­lio decisions prior­i­tiz­ing nice to have indica­tions or irrational go-to-market model decisions neglect­ing basic ROI consid­er­a­tions. When asked about the relation­ship between impact and profitabil­i­ty, nearly two-thirds answered that impact drives profitabil­i­ty.

From an invest­ment horizon (and multi­ple expec­ta­tions) perspec­tive, there are three main strate­gies (not mutual­ly exclu­sive): Fast exit, (short term, 3 years), build a profitable business in Germany (mid-term, 3–5 years), scale global­ly (long-term, 5+ years).

Fast Exit

We have recent­ly witnessed a few fast exits in the German DiGA market and gener­al­ly there are three differ­ent scenar­ios for this strat­e­gy: Exit to a life sciences compa­ny, exit to a Digital Health compa­ny, or consol­i­da­tion with a competi­tor

The three scenar­ios with case examples are outlined in Exhib­it 06.

Build a profitable business

A few compa­nies have succeed­ed in build­ing a profitable DiGA business in Germany. An example of a provider with a clear commer­cial focus on the way to profitabil­i­ty, based on a platform strat­e­gy, is Kranus Health. The compa­ny focus­es on urolo­gy and has already launched two DiGAs with sever­al others in devel­op­ment.

Scale globally

GAIA and Kaia are two German Digital Health/ DiGA compa­nies with a strong footprint in the US. Scaling inter­na­tion­al­ly as a prescrip­tion DTx/DiGA under newly intro­duced approval and reimburse­ment schemes, such as PECAN in France, will take time and may not be as straight­for­ward as initial­ly expect­ed. The recent negative assess­ment of HelloBetter’s Insom­nia DiGA by French author­i­ties illus­trates this challenge.

Never­the­less we are expect­ing a steep learn­ing curve here for the DiGA compa­nies leading to a gradual global­iza­tion of their revenues. Commer­cial­iza­tion issues on a global scale are likely to be similar to those in Germany.

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In summa­ry, the prereq­ui­sites for a success­ful DiGA invest­ment are as follows:

• The founder team has a “commer­cial first” mindset
• The thera­peu­tic area/indications are commer­cial­ly inter­est­ing
• Founders and investors have a clear and common value creation strat­e­gy